$3b rise in bill to bring households up to speed

Lucy Battersby and Ben Grubb

THE cost of the nation's biggest infrastructure project has blown out by $2.9 billion over the next 10 years and the deadline pushed back by six months.

The NBN Co chief, Mike Quigley, and the Communications Minister, Stephen Conroy, said construction costs would rise by 3.9 per cent to $37.4 billion and the deadline for rolling out the high-speed internet connection to Australian homes had been pushed back to June 2021.

A nine month delay in the deal with Telstra affected the timetable for roll out ... Stephen Conroy, Communications Minister. Photo: Tamara Voninski

Higher labour costs, longer network distances and future upgrades to wireless and satellite broadband equipment have pushed up the cost. Operating expenses - primarily staff costs - have jumped from $3.7 billion to $7.8 billion, while savings have been made in other areas.

The opposition communications spokesman, Malcolm Turnbull, jumped on the blowouts.

''Labor's national broadband network is falling disastrously behind every benchmark the government has set for it except one - the amount of taxpayers' money being spent,'' he said in a statement. ''NBN Co may not be able to put together a budget or roll out a network, but it knows how to take care of itself.''

Mr Turnbull has said previously that a Coalition government would deliver broadband services through a cheaper and quicker plan, albeit at slower speeds. He renewed his call for a cost-benefit analysis by the Productivity Commission.

Advertisement

The government said the higher costs were expected to boost revenues by getting more households on to the network more quickly. And the government is still expected to make a 7 per cent return on the project.

Operational costs were pushed up by an $800 million agreement between Optus and NBN Co - under which Optus cable customers are transferred to fibre straight away - and a decision to lease more infrastructure from Telstra.

The head of leadership and quality at the Institute of Chartered Accountants Australia, Yasser El-Ansary, said the cost increases might appear insignificant over time and that cost overruns on large infrastructure projects were not unusual.

NBN Co's annual revenue is now expected to be $10 billion by 2028, rather than $8.5 billion, because of earlier investments. The speed of the rollout is expected to quicken now that construction contracts are in place. NBN Co expects to have 44,000 fibre connections by next June, 440,000 by June 2014 and 1.3 million by June 2015. It still expects construction to be under way at 758,000 premises by the end of this year.

Mr Conroy said a nine-month delay in the deal with Telstra had affected the timetable.

''The detailed design of the volume rollout could not start until five months ago. Only then could the NBN Co design teams have access to the layout of all the Telstra pits and ducts across the nation,'' he said.

Policy changes have affected the cost and timetable. For example, NBN Co must install fibre-optic cables to all new housing estates with more than 100 premises, a policy decision that was ''only partially understood'' when the 2010 corporate plan was released.

And the ugly wall-mounted batteries - the most contentious issue with customers - will no longer be forced into households getting hooked up to the network. The government reversed its policy yesterday to make them optional.